Raising rivals' fixed costs

Morten Hviid; Matthew Olczak

doi:10.1080/13571516.2015.1055913

Raising rivals' fixed costs

Morten Hviid, Matthew Olczak

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

16 Downloads (Pure)

Abstract

This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities.

Original language	English
Pages (from-to)	19-36
Number of pages	18
Journal	International Journal of the Economics of Business
Volume	23
Issue number	1
Early online date	6 Aug 2015
DOIs	https://doi.org/10.1080/13571516.2015.1055913
Publication status	Published - 2016

Keywords

Raising Rivals Costs
Fixed Costs
Exclusion
Entry Deterrence
Monopolisation

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10.1080/13571516.2015.1055913

Raising Rivals' Fixed Costs International Journal of the Economics of Business
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/Licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
Final published version, 422 KB

CCP Centre for Competition Policy Phase 2 (2009-14)
Hviid, M., Akman, P., Davies, S., Hargreaves-Heap, S., Harker, M., Kassim, H., Lyons, B., Stephan, A., Sugden, R., Waddams, C., Wadlow, C., Zizzo, D., Allen-Rogers, D., Allen-Rogers, D. & Allen-Rogers, D.
Economic and Social Research Council
1/09/09 → 30/11/14
Project: Research

Cite this

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Raising rivals' fixed costs

Abstract

Keywords

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Projects

CCP Centre for Competition Policy Phase 2 (2009-14)

Cite this